BUSINESS PLANNING Dr

BUSINESS PLANNING Dr. Philippe Chereau Director, SKEMA Ventures INTRODUCTION OF THE LECTURER

Prof. Philippe CHEREAU is the director of SKEMA Ventures and associate professor in strategy and entrepreneurship at SKEMA Business School. He holds a Doctorate from Aix-Marseille Université, a PhD from SKEMA BS, and a Master in Management from EDHEC Business School. He is also a visiting faculty at Aix- Marseille Université, Mines ParisTech and University of Naples Frederico II. As a scholar, he conducts research on the relationships between competitive strategy, business model innovation and performance in innovative firms. He teaches strategy, entrepreneurship, strategic consulting, international business, negotiation, and regularly lectures for executive seminars, in France, Without practice, China, Brazil, Italy, and the USA. theory is As a former entrepreneur, his teaching bridges the gap between advanced academic knowledge and practice. He has held positions in international meaningless, and business development, general management and executive consulting. vice versa . He is the co-author of the textbooks Le Conseil Stratégique pour l’Entreprise published in 2014, rewarded among “best books in Management”, and Strategic Consulting: Tools & Methods for Successful Strategy Missions , published in 2017. SYNOPSIS

Course objectives 1. From strategy, to business model, to business plan 1.1. The process of strategic management 1.2. From strategy to BM 1.3. From BM to BP 2. The business plan 2.1. Types and objectives of BP 2.2. Framework, content and tools 3. The pitched business plan: The lite BP toolkit

3 COURSE OBJECTIVES

What we want to achieve through this course …

‹ Introduce students to the process of designing, formulating and pitching a Business Plan (BP)

‹ Deliver the template of a BP commonly accepted by investors and business angels when evaluating the relevance of an entrepreneurial project

‹ Beyond the objective of presenting a business, introduce the BP as a strategic planning tool

4 1. FROM STRATEGY TO BUSINESS MODEL TO BUSINESS PLAN 1.1. THE STRATEGIC MANAGEMENT PROCESS

Strategy formulation

Clarifying firm’s vision and Evaluating firm’s competitive positioning and designing strategic options accordingly mission Selecting strategic ° How should the firm create a competitive directions: Strategy advantage? ° Should the firm diversify its business • Competitive External and internal portfolio? positioning environment analysis: ° Does the firm innovate appropriately? • Growth choices Identifying opportunities ° Should the firm internationalize? • Growth modes and threats; Strengths and ° Should the firm grow organically or through weaknesses alliances?

influences… Strategy implementation of strategy strategy offormulation Business model : The logic chosen by the firm to implement its Strategic configurations:

External and internal environment environment internal andExternal strategy by creating delivering and capturing value in Aligning strategic directions with relationship with a network of exchange partners organizational structure and process process adaptiveofan beginning … and • Customer value proposition • Product/market domains • Profit formula • Strategic capabilities • Key resources to leverage • Organisational configuration • Key processes and activities to implement • Key indicators to evaluate effectiveness of implementation

6 1.1. THE STRATEGIC MANAGEMENT PROCESS

° Strategy : Plan of actions to create a valuable, sustainable competitive position in the targeted market. ⇒ it implies that the firm has made choices about how it wishes to compete in the market (price competitiveness, differentiation, innovation, expertise)

° Business model: The logical combination of choices (clients, offer, organization, profit formula) that explains how the firm will execute its strategy to reach and maintain this competitive position.

=> BM must reflect the realized strategy ! 1.2 FROM STRATEGY TO BM

Strategic choices predict BM design ° There are “ideal” combinations of strategy-BM ° The more firms deviate from the ideal combination, the more their overall performance decreases 1.2 FROM STRATEGY TO BM

BM explains how the firm works, and answers 4 questions: ° Who are my clients? ° What do they consider valuable? ° How can I generate revenue by offering what they really want? ° What is the best profit formula to create value for the clients, at an appropriate cost for the company?

BM is the logic chosen to operate the firm’s strategy, based on 4 key choices : ° a Value Proposition to Customers, ° a Profit Formula (revenues / costs), ° Key Activities, ° Key Resources. 1.2 FROM STRATEGY TO BM USING THE BM CANVAS

2 Value 4 Customer 6 Key activities proposition relationships & practices 1 Customer segments 8 Key partners the solution They face To the a problem problem Who will be the early 7 Key resources 3 Channels adopters?

9 Cost structure 5 Revenue model

Sourced and adapted from Osterwalder & Pigneur (2010) and Johnson, Christensen & Kagermann (2008) 1.2 FROM STRATEGY TO BM USING THE BM CANVAS 1-PROBLEM 4-SOLUTION 3-UNIQUE VALUE 7-UNFAIR ADVANTAGE 2-CUSTOMERS List your customers’ top 3 The product and services for each PROPOSITION Something that can’t be easily copied SEGMENTS problems you want to specific targeted consumer segment or bought Single, clear, compelling message that List your target customers address and partner of the ecosystem … turns an unaware visitor into an and users. They may interested prospect • have needs that require … To solve the problem (or satisfy the different handling need) specific to each targeted • be addressed via different consumer segment and partner distribution channels • have distinct levels of profitability • be interested in different EXISTING HIGH LEVEL 6-CUSTOMERS 5-CHANNELS aspects of VP ALTERNATIVES CONCEPT RELATIONSHIPS How to raise awareness about the VP, and deliver it to consumers and partners. List how these problems are List your X for Y analogy Means you plan to use to conquer, hold and EARLY ADOPTERS • Make known the existence of the offer solved today E.g.: Airbnb = Blablacar for retain consumers and partners of the List the characteristics of the • Allow consumers to evaluate the VP housing business ecosystem customers who will generate • Allow consumers to purchase the offer fast and easy sales • Deliver the offer • Maintain the VP after the purchase

11-KEY PARTNERS 9-KEY ACTIVITIES & PRACTICES 10-KEY RESOURCES List your Key Partners needed to deliver your value That help provide the VP profitably, reproducibly, and at a List the resources you need to deliver your value proposition, proposition and ensure your revenue streams large-scale deal with your distribution channels, sustain your customer relationships & ensure your revenue streams • Company-provider and company-producer partnerships to • Activities: design, R&D, procurement, production, secure the upstream value chain marketing, sales, recruitment, training, SI • Physical assets (equipment, facilities, IS, ...) • Strategic alliances between non-competitors • Human Resources • Partnerships between competitors: Coopetition • Rules and key indicators: margin requirements, rules on • Intellectual assets (patents, trademarks, reputation • Joint venture to develop a new VP accounts receivables & payables, quotes conversion rate, ... • Financial assets • Support from local authorities … 12-COST STRUCTURE 8-REVENUE MODEL Split your costs into variable and fixed costs, think of the possible impact of economies of List your sources of revenues and margin scale according to : • Turnover model: price x volume of sales. How much can the company expect to earn and ° Key activities how to achieve this level of sales (market size captured, purchase frequency, additional ° Key resources sales, ...) ° Key partnerships • Margin model: how much margin each transaction must generate to achieve the expected profitability 1.2 FROM STRATEGY TO BM: THE ISSUE OF BM FIT

Like a good moving vehicle, all components of the BM must permanently fit together to ° Reinforce one-another ° Ensure the dynamic consistency of the BM when one component has to change 1.2 FROM STRATEGY TO BM: THE ISSUE OF BM FIT 1-PROBLEM 4-SOLUTION 3-UNIQUE VALUE 7-UNFAIR ADVANTAGE 2-CUSTOMERS ° Energy losses in electrical ° Sizable PU foam loaded with Ag PROPOSITION ° Systemic offer: SEGMENTS connections or Cu audit + solutions + obligation of result ⇒Generate substantial costs ° Installation during maintenance ° Optimization of energy consumption ° Unique strategic capabilities: ° The electro-intensive ⇒ for energy users ° Transformation of foam into Guarantee of energy savings (90%)! electrical expertise no longer taught industries : chemicals, ⇒ ° Repeated maintenance permanent connection Easy to install in engineering schools steel, glass ⇒ ⇒Impacts on productivity !!! ° Electrical Audit: identification Sustainability of connection ° Countries where the price ⇒ ⇒Human risks during of potential energy gains No heating => easy maintenance of electricity is free and maintenance ° Remote monitoring of energy sharply increasing (UK, D, consumption Norway, ...) or with incentives to reduce consumption (F) 5-CHANNELS ° Referencing with energy suppliers EXISTING HIGH LEVEL CONCEPT 6-CUSTOMERS (GDF SUEZ, EDF, HydroQuebec, ...) ALTERNATIVES AMC ETEC is the KPMG or EY of RELATIONSHIPS used as a "Trojan horse" partners EARLY ADOPTERS energy consumption ° Direct prospection of SupElec Alumni Factories of chlor-alkali ° Alumni from engineer schools with targeted industries electrolysis under Conductive grease, grinding the ° Partner of energy suppliers ° Technical mailing to major chemical connections - not satisfying! construction or shifting to the ° Shared platform with the client for tele- industry accounts membrane technology monitoring of energy consumption ° Answer to calls for tender ° Yearly audit of energy optimisation 11-KEY PARTNERS 9-KEY ACTIVITIES & PRACTICES 10-KEY RESOURCES ° Network of available free lance engineers ° Energy audit + technical report ° Electrotechnical experts (recently-retired experts) ° Energy consumption monitoring ° R&D unit with industrial tool for « real situation » tests ° Referencing with domestic electricity suppliers ° Electro-technical R&D, patenting ° Portfolio of electrotechnical patents with world coverage ° Network of specialised retailers of electro-technical ° Engineering of unique solutions ° High self-financing capacity equipment ° Production of conductive foam ° ISO 14001 certification ° “Energy” competitive clusters ° Installation, maintenance ° Technical intelligence specialist ° ADEME (French agency for environment and ° Scanning of calls for tender + application file energy management) and its European counterparts ° Scanning of new plant construction/renovation + technology shift ° Bid preparation Rules and metrics : ° % of commercial margin, down payment, % of conversion rate

12-COST STRUCTURE 8-REVENUE MODEL ° Variable costs : raw materials (conductive metals, chemicals), equipment, fees of free lance ° % on energy savings at clients’ experts, sales costs (audit and prospecting campaigns) ° Energy Audits ° Fixed costs: HR, production tool, patent costs, certification tests, renewal certification, ... ° Sales of M 2 of Ecocontact ® foam ° Sales of electric equipments 1.2 FROM STRATEGY TO BM: THE ISSUE OF BM FIT 1-PROBLEM 4-SOLUTION 3-UNIQUE VALUE 7-UNFAIR ADVANTAGE 2-CUSTOMERS ° Energy losses in electrical ° Sizable PU foam loaded with Ag PROPOSITION ° Systemic offer: SEGMENTS connections or Cu audit + solutions + obligation of result ⇒Generate substantial costs ° Installation during maintenance ° Optimization of energy consumption ° Unique strategic capabilities: ° The electro-intensive ⇒ for energy users ° Transformation of foam into Guarantee of energy savings (90%)! electrical expertise no longer taught industries : chemicals, ⇒ ° Repeated maintenance permanent connection Easy to install in engineering schools steel, glass ⇒ ⇒Impacts on productivity !!! ° Electrical Audit: identification Sustainability of connection ° Countries where the price ⇒ ⇒Human risks during of potential energy gains No heating => easy maintenance of electricity is free and maintenance ° Remote monitoring of energy sharply increasing (UK, D, consumption Norway, ...) or with incentives to reduce consumption (F) 5-CHANNELS ° Referencing with energy suppliers EXISTING HIGH LEVEL CONCEPT 6-CUSTOMERS (GDF SUEZ, EDF, HydroQuebec, ...) ALTERNATIVES AMC ETEC is the KPMG or EY of RELATIONSHIPS used as a "Trojan horse" partners EARLY ADOPTERS energy consumption ° Direct prospection of SupElec Alumni Factories of chlor-alkali ° Alumni from engineer schools with targeted industries electrolysis under Conductive grease, grinding the ° Partner of energy suppliers ° Technical mailing to major chemical connections - not satisfying! construction or shifting to the ° Shared platform with the client for tele- industry accounts membrane technology monitoring of energy consumption ° Answer to calls for tender ° Yearly audit of energy optimisation 11-KEY PARTNERS 9-KEY ACTIVITIES & PRACTICES 10-KEY RESOURCES ° Network of available free lance engineers ° Energy audit + technical report ° Electrotechnical experts (recently-retired experts) ° Energy consumption monitoring ° R&D unit with industrial tool for « real situation » tests ° Referencing with domestic electricity suppliers ° Electro-technical R&D, patenting ° Portfolio of electrotechnical patents with world coverage ° Network of specialised retailers of electro-technical ° Engineering of unique solutions ° High self-financing capacity equipment ° Production of conductive foam ° ISO 14001 certification ° “Energy” competitive clusters ° Installation, maintenance ° Technical intelligence specialist ° ADEME (French agency for environment and ° Scanning of calls for tender + application file energy management) and its European counterparts ° Scanning of new plant construction/renovation + technology shift ° Bid preparation Rules and metrics : ° % of commercial margin, down payment, % of conversion rate

The full BP is the story-writing exercise that reflects the coherence of your BM

Context – Vision/mission Market analysis ° Business opportunities ° Targeted segments ° Competition ° Market forces The various components of the BM ° Value proposition – competitive advantage Activities of the firm will structure the formulation of the BP Strategy and development plan Marketing and sales plan Organization ° Key resources ° Key partners Financial forecasts ° Revenue model ° Cost structure Appendices 1.3 FROM BM TO BUSINESS PLAN

The pitched BP is a story-telling exercise that reflects the coherence of the BM

The various components of the BM will structure the pitched deck of the BP 2. THE BUSINESS PLAN 2.1. TYPES AND OBJECTIVES OF BUSINESS PLANS

The different types of Business plan

° The Elevator Pitch a one-minute oral presentation ° The pitched Business Plan approximately 10-14 slides ° The Full Business Plan approximately 50 pages or more 2.1. TYPES AND OBJECTIVES OF BUSINESS PLANS

The different types of Business plan

The Elevator Pitch is ° a one to two minutes oral presentation ° a hook to capture attention ° a synthetic description of the product/market domain(s) of the business, the value proposition to clients, the associated revenue model, and the planned growth options ° a straightforward announcement of your demand to the audience 2.1. TYPES AND OBJECTIVES OF BUSINESS PLANS

The different types of Business plan

The pitched BP is ° the formalized presentation of the 20 mn pitched description of your project ° a concentrate of the project likely to convince stakeholders to support it 2.1. TYPES AND OBJECTIVES OF BUSINESS PLANS

The different types of Business plan

The full BP is : ° the detailed description of your project, and the roadmap to implement it that encompasses all relevant and reliable justifications for starting it, ° supported by the full description of the business model components and the expected financial outputs that will make the project viable ° and the planned growth options and growth modes to develop it 2.2. THE BP FRAMEWORK (SEE MASTER THESIS GUIDELINES)

Executive summary 1- Context 2- Market analysis 3- Activities of the firm 4- Strategy and development plan 5- Marketing and sales plan 6- Organization 7- Financial forecasts 8- Appendices

22 2.2. THE BP FRAMEWORK (SEE GUIDELINES) Executive summary

Objective: an extremely brief presentation of the company and its project in order to ° Avoid, especially for reasons of confidentiality, to broadly disseminate a detailed version of the business plan, ° Motivate investors to fund the project, with a short presentation that encompasses the key elements of the company’s strategy, BM and financials

Content: ° Context (problem statement): 1/2 pages max ° Activity: 2 pages max ° Market: 2 pages max ° Financial information: Revenues and net result n-1, n, n+1 to n+5 ° Strengths of the project: 3 or 4 major points maximum ° Prospects : Competitive positioning, products, activities, ... , financial Performance, expected rents for investors (if any) ° Proposed operation (if any): Types and amount of funds to raise, for which % of shares

Length: 5-6 pages max

Method/tools: NA 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 1-Context

Objective: The context should simply describe an overview of the business of the company and its industry/markets, in the form of a short introduction, without going into details since all themes are handled thereafter.

Content: ° The activity of the company and its market: the nature of the business and the distinctive competencies or differentiating features of the company: 3 pages max ° The few key dates in the history of the company: creation, product releases, major contracts, fundraising, recruitments, certification, etc.): 2 pages max ° The historical evolution of sales, net income and workforce in recent years.

Length: 5-6 pages max

Method/tools: BM canvas components (problem, solution, value proposition, key partners, key activities and resources) 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 2-Market analysis

Objective: The analysis of the market and the competition should be the demonstration of the company's knowledge of the market structure and its trends. Only essential information are to be included in the business plan (the details of external diagnostic, market research, ... are to be attached in the appendices).

Content: ° Market segment(s) on which the company positions its products. ° Major trends of this or these segments. Provide prospective information about the evolution of macro- environment (PESTEL) and industry contingencies (market forces), key success factors by segment ° Different forms of competition (direct, indirect, substitutes, potential threat, ...), nature and level of aggressiveness. Qualify and name key competitors and form strategic groups according to their characteristics (size, followed strategies, capitalistic situations ...). ° Define the positioning of the products or activities of the company in this environment ° Clarify the competitive advantages of the company's products.

Length: 7-10 pages max

Method/tools: PESTEL, market forces, industry KSF, industry competitive system, industry value curve/ company value curve … to highlight the OT of the SWOT, 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 3-Activities of the firm

Objective: Description of the distinctive characteristics of the business or products offered by the company.

Content: ° Overall activities of the firm (types of products or services offered and for what types of applications or needs). ° Description of the goods or services of the company (globally or by sub-groups in the case of multiple activities) and the characteristics of each of them (from the perspective of the customer). ° Examples of use and effectiveness of the products, and possible simplified technical data. ° Evolution of the current and future structure of the products or services portfolio (stable, innovations, extension of the range ...). ° Status of intellectual and industrial protection.

Length: 5-8 pages max

Method/tools: BM components (solution, value proposition, unfair advantage) 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 4-Strategy and development plan

Objective: Description of the competitive and growth strategy choices made by the company to position and develop.

Content: ° Positioning (value of esteem, value of use) aimed by the company and the role in its value network (subcontractor, international operator, distributor, ...) and the situation envisaged in five years. ° Major strategic actions to reach the objectives (main steps, pace, key operations, ...) and on what the company will focus in the next three/five years. ° Key risk factors identified for the implementation of this approach and the retaliation actions or bypass scenarios considered.

Length: 6-7 pages max

Method/tools: Generic strategy typologies (Porter, Miles and Snow), growth options and modes, scenario design and evaluation (SAFe methodology) – see SKEMA Ventures blog 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 5-Marketing and sales plan

Objective: Description of the sales and marketing action plan with regards to the chosen strategy.

Content: ° Marketing plan and actions to meet market needs (targeting certain market segments rather than others, brand policy ...). ° Sales forecasts by market segment and product or group of products / services, taking into account the time of negotiation / contracting of each activity and time-to-market for new offerings. ° Preferred methods of distribution and customer retention (sales organization structure, channels, potential partnerships, communication / information, customer relationships...).

Length: 4-6 pages max

Method/tools: 4Ps, branding, clientele ABC matrix, BM components (channels, customers relationship) 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 6-Organization

Objective: Description of the organizational features that will enable the company to successfully implement its strategy.

Content: ° General organization of production (done internally or outsourced, relations and cooperation with subcontractors, ...) and justification of these choices (financially, strategically, ...). ° Supply chain, "order-to-cash" process and specific constraints (critical inventory management, payment terms, procurement, ...). ° Organizational structure, roles and responsibilities among the various key personnel, recruitment scheduled or underway. ° Emphasize the VRIN capabilities of the firm

Length: 3-4 pages max

Method/tools: BM components (key activities, key resources, key partners). Internal diagnostic of the company’s SW of the SWOT. 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 7-Financial forecasts

Objective: Demonstrate the financial transcription and relevance of the forecasted strategy and BM: KFI, strategic financial ratios, ....

Content: ° Evolution of revenues over the next 5 years (highlighting changes, new business, launching of new products, entry in new markets, ...). ° Evolution of expenses (fixed and variable costs) and margins over the next 5 years and justifications of main developments (with reference to operational plans described above). ° Funding decisions (loans, grants, investors, …) ° Cash flow statement and evolution of the use of funds and cash needed. ° High and low hypotheses regarding the implementation of forecasted development strategy.

Length: 3-4 pages max including financial tables

Method/tools: BM components (revenue model, cost structure), DEFI tool (see SKEMA Ventures blog), DuPont model of strategic financial ratios 2.2. THE BP FRAMEWORK (SEE GUIDELINES) 8-Appendices

Objective: Demonstrate evidences of what has been described in the BP

Content: All documents (questionnaires, survey results, tables, ….) that support your BP. 3. THE PITCHED BUSINESS PLAN The 14 slides of the pitched Business Plan

1. VISION/MISSION 2. BUSINESS OPPORTUNITIES 3. SOLUTION/OFFER 4. VALUE PROPOSITION/CUSTOMER BENEFITS 5. TARGETED MARKET 6. COMPETITION 7. SIMPLIFED BUSINESS MODEL 8. GO TO MARKET STRATEGY 9. THE TEAM 10. HISTORY OF THE PROJECT 11. THE NEXT 18 MONTHS 12. KEY FIGURES 13. RISKS 14. DEMAND Checking the 14 slides V 1. Vision/Mission Do I provide a clear (understandable) picture of our raison d’être, the role we want to play in the future, and the positioning of my business? Checking the 14 slides V 2. Business opportunities Do I make the existence of a latent, imperfectly satisfied, or unsatisfied demand clear to the audience?

Good but how big is the opportunity? Data are missing Checking the 14 slides

V 3. Solution/offer Do I clearly describe the offer I propose to take advantage of above mentioned opportunities? Is it understandable by non-specialists? Checking the 14 slides V 4. Value Proposition Is the benefit we offer to clients obvious? Do I make clear how different we are from existing offerings? Checking the 14 slides V 5. Targeted market Have I characterized the market segment(s) clearly enough in order for the audience to figure out the present and future business potential and involved stakeholders (clients, users)?

Good But where are these patients? In which countries? What about the welfare systems of targeted markets Checking the 14 slides V 6. Competition Have I encompassed all potential competitors and their retaliation capacities (competitive positioning, substitutes, market power, barriers to entry)? Checking the 14 slides V 7. Simplified business model Can the audience easily understand whom I sell to, wo uses my product/service, who recommends it, whom I cooperate with, how do I get my revenues, and what is my costs structure? Checking the 14 slides V 8. Go-to-market strategy Have I described the various channels and steps to produce, communicate about, show, sell my offer and grow? Checking the 14 slides V 9. The team Have I emphasized enough why this is us and now? Is it really relevant? Is there any talent missing? Checking the 14 slides

V 10. Genesis of the project Does the track record of the project make sense? Is it reassuring? Checking the 14 slides V 11. The next 18 months Would the audience likely make the same choices for the near future considering what I have already introduced to them? Would they support this short-term plan? Checking the 14 slides V 12. Key figures Do I provide a realistic picture of my financial objectives? Do I need to give explanations about figures or are they crystal clear? (sales, fixed and variables costs, investments, funding decisions) Checking the 14 slides

V 13. Risks Have I addressed the real risks of the project? Do I show that I am prepared to handle them? Is it reassuring? Checking the 14 slides

V 14. Demand Is my demand logic? Do I phrase it in an attractive way? (They should rush to support the project !) CONCLUSION

1) Strategy predicts Business Model design : Strategy-BM fit is key ! 2) BM components structure the formulation of the Business Plan 3) The full BP is the story-writing that reflects the coherence of the BM 4) The pitched BP is the story-telling that reflects the coherence of the BM ⇒ The more aligned BM components with strategy choices, the higher the credibility of your Business Plan ⇒ The more aligned BM components with one another, the higher the solidity (and generated trust) of your Business Plan